Esm Trial Begins

To Focus On Divorce Case

The prosecution`s case against two former executives of ESM Government Securities Inc. will focus on events surrounding a 1980 divorce trial, a defense attorney told a federal jury Monday.

``I think it`s going to be a very significant part of the government`s case against my client,`` said Al Thomas, a lawyer for former ESM President Nicholas Wallace.

Thomas made the prediction Monday as the trial began in Fort Lauderdale before U.S. District Judge Jose A. Gonzalez Jr.

Wallace, 45, and a co-defendant, Stanley Wolfe, 43, are accused of using the U.S. mail and wires to defraud customers of ESM Government Securities Inc., a Fort Lauderdale firm that collapsed in March 1985 owing $300 million. Other ESM executives have already pleaded guilty to charges stemming from the collapse.

A few days before ESM failed, Wallace told a friend he wanted to maintain ESM as a going concern, Assistant U.S. Attorney Jane Moskowitz told the seven- woman, six-man jury.

``We`ve got to find a way to keep ESM operating,`` she quoted Wallace as saying. ``It`s the greatest money-maker ever.``

She described Wallace as a member of ``top management,`` who received $2.3 million in salary and bonuses over five years and owed ESM $4 million in personal loans.

The first witness she called, former ESM employee Nancy Coleman, testified that Wallace signed letters that falsely assured customers that their securities were segregated at a New York bank. In 1984, Wallace directed a change in the wording of the letters.

Defense attorneys described their clients as executives with titles but little power and no knowledge of the fraud. Thomas said that Wallace repaid $2 million in loans.

``Everybody knows that Nicholas Wallace was president in name only,`` Thomas said. Wallace was not included in key meetings after ESM`s chief financial officer died and with executives of ESM`s biggest customer, Home State Savings Bank, a Cincinnati thrift owned by financier Marvin Warner.

Thomas interjected that Warner, while serving as U.S. ambassador to Switzerland, had a teletype directly linked to ESM`s office in Fort Lauderdale.

The key figures in the scheme, Thomas said, were Alan Novick, the financial officer who died a few months before ESM closed, and former ESM Chairman Ron Ewton, who pleaded guilty and agreed to testify for the prosecution.

The prosecution will focus on testimony about the 1980 divorce trial of ESM founder and former executive Robert Seneca, Thomas predicted.

In that divorce case, lawyers for Mrs. Seneca tried to show that her husband was hiding financial resources.

One of her attorneys, Richard Birnbaum, will testify that Wallace told Birnbaum and an accountant that ESM was broke, Thomas said. ``This is a figment of his imagination,`` Thomas said.

Birnbaum also will testify that Wallace told the judge that ESM was insolvent.

``We contend that that did not happen,`` Thomas said. Miami lawyer Eugene Stearns, who represented Robert Seneca, and Gil Haddad, who represented ESM in the divorce trial, will support the defense`s case, Thomas said.

Wallace is charged with conspiracy and 40 counts of mail and wire fraud. Co- defendant Stanley Wolfe, who cleared securities transactions for ESM, is charged in the conspiracy and in 25 counts of fraud.